Investing.com-- Shares in Australia's De Grey Mining Ltd (ASX:DEG) soared on Monday after mining giant Northern Star Resources (ASX:NST) said it will acquire De Grey in a stock-based deal valued at about A$5 billion ($3.25 billion).

The acquisition, subject to shareholder and regulatory approvals, will establish Northern Star as a dominant global player in gold production.

Under the terms of the agreement, De Grey shareholders will receive 0.119 new Northern Star shares for each De Grey share held, representing an implied price of A$2.08 per share. This marks a 36.8% premium to De Grey’s closing price on November 29. Upon completion, Northern Star shareholders will own 80.1% of the combined entity, with De Grey shareholders holding the remaining 19.9%.

De Grey shares climbed nearly 30% on Monday to A$1.97, while Northern Star stock fell 6.1%.

Shares of peer Gold Road Resources Ltd (ASX:GOR) also surged over 12% to hit their record high, following the announcement, reflecting optimism across the Australian gold sector.

The deal centers on De Grey’s Hemi Gold Project in Western Australia, one of the largest undeveloped gold assets globally, boasting reserves of 6.0 million ounces and projected annual production of 530,000 ounces over its first decade. Northern Star plans to leverage its expertise in exploration and mining to expedite Hemi’s development while integrating De Grey’s team into its operations.

Northern Star CEO Stuart Tonkin called the acquisition a “transformational step” in the company’s strategy to increase annual gold output to 2.5 million ounces by 2029. “Hemi’s addition complements our portfolio and strengthens our position as a low-cost producer in Tier-1 jurisdictions,” he said, referencing the company’s existing operations in Australia and Alaska.

De Grey CEO Glenn Jardine said the agreement was a “compelling opportunity” for shareholders, allowing them to benefit from Hemi’s upside while gaining exposure to Northern Star’s diversified operations and consistent dividend track record.

The boards of both companies have unanimously endorsed the deal, which is slated for a shareholder vote in April 2025, with final approval expected by May.